Safe and Sound

Johnson State Bank

Johnson, KS
5
Star Rating
Founded in 1914, Johnson State Bank is an FDIC-insured bank based in Johnson, KS. The bank has equity of $11.7 million on $76.3 million in assets, according to December 31, 2017, regulatory filings.

With 17 full-time employees in 2 offices in KS, the bank holds loans and leases worth $33.3 million, including real estate loans of $9.5 million. U.S. bank customers currently have $61.7 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Johnson State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It acts as a buffer against losses and as protection for accountholders when a bank is experiencing financial trouble. When looking at safety and soundness, more capital is preferred.

On our test to measure capital adequacy, Johnson State Bank racked up 22 out of a possible 30 points, better than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Johnson State Bank's Tier 1 capital ratio was 26.35 percent, exceeding the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic headwinds.

Overall, Johnson State Bank held equity amounting to 15.34 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets means a bank could have to use capital to absorb losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and increasing the chances of a failure in the future.

Johnson State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.37 percent of Johnson State Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Johnson State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Losses, on the other hand, take away from a bank's ability to do those things.

On Bankrate's earnings test, Johnson State Bank scored 16 out of a possible 30, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Johnson State Bank was 7.86 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $910,000 on total equity of $11.7 million. The bank experienced an annualized return on average assets, or ROA, of 1.20 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.